Along the border between Mexico and the United States by the Pacific Ocean,
San Diego (USA) is on the north side and Tijuana (MEX) is on the south
side. How do these two cities compare with each other? They are
about the same in terms of population size. But Tijuana has about 1,600
pharmacies while San Diego has about 400 pharmacies. Furthermore, someone
crossing over from San Diego to Tijuana will immediately encounter the
concentration of pharmacies known as Pharmacy Row. What gives?

To the south, thousands of Americans, mostly senior citizens, cross
the border daily to buy prescription drugs at places such as Tijuana
and Algodones on the California border, Nogales south of Arizona and
Ciudad Juarez opposite El Paso. They are pursuing savings of up to 75%
on medicines ranging from antibiotics and antidepressants to heart
medication and chemotherapy agents. ...

Alfonso Gonzalez, a San Diego retiree, drives to Tijuana every month
to buy eyedrops for his glaucoma. He pays $20 for the same monthly
supply of drops that in San Diego costs $90. That's a considerable
savings for 70-year-old Gonzalez and his wife, who subsist on the
$1,100 a month they receive in Social Security benefits. "We retirees are the ones who suffer the most because the drug
business is so controlled in the United States. It's why you never see
a price reduction," said Gonzalez, who said that Medicare did not
cover the cost of his drops, which he said were vital in keeping his
eyesight. He said the Tijuana pharmacy he patronized sold him his drops without
a prescription.

The situation of the price arbitrage is documented in this earlier New
York Times story on July 22, 2003:

Last year, average drug prices in the
United States were 67 percent higher than those in Canada and about
twice those of Italy and France, according to a report by the Patented
Medicine Prices Review Board, a Canadian health agency. The United
States spends 1.6 percent of its gross domestic product on drugs,
compared with 0.6 percent in Germany and 0.9 percent in Canada,
according to the report. The drug industry now gets more than half of
its worldwide revenues from American consumers.

The high prices drove low-income Americans to make shopping trips south of
the border. This led to a proposed Congressional bill to ease imports of less expensive drugs already
sold in the United States. Do the pharmaceutical companies have
sympathy for the beleaguered consumers? The same New York Times article
reports:

Pfizer
, one of the nation's largest drug companies, took out a full-page
advertisement in Roll Call, a Capitol Hill newspaper, to publish a
letter from its chief executive, Hank McKinnell, who says the proposal
threatens the safety of the nation's drug supply. "The
F.D.A. would no longer be able to make sure that medications are
stored and shipped safely," Mr. McKinnell wrote.

This is no way to make friends with the people.

We will now cite some survey data on the attitudes of Americans towards the
pharmaceutical companies. The data source is the MARS OTC/DTC
Pharmaceutical Study. This is a syndicated study of American adults that
is fielded once every year since 2001. In 2001, there were 23,705
respondents; in 2002, there were 22,097 respondents; in 2003, there were 21,106
respondents; and in 2004, there were 21,054 respondents. So this is a
large sample study that uses the identical methodology over time. Within
the MARS study, the respondents are shown a statement: "Without stricter
regulation, drug companies would become dangerous to the American
public." In the chart below, we show the agreement/disagreement rates
with this statement. Without doubt, about half the population agree that
with this statement either a lot or somewhat, and this has been consistent over
time. Conversely, only about 10% of the population would disagree with
this statement.

Given that the United States is a democracy, will there be stricter
regulations as the will of the people seem to consistently prefer? Not
like at all. The same New York Times article reports:

Drug manufacturers are among the
biggest contributors to political campaigns; during the 2002 election
cycle, the industry gave nearly $27 million to political candidates,
three-quarters of it to Republicans.

The pharmaceutical companies also have a tremendous lobbying presence in
Washington DC. According to this May 31, 2003 article in the New York
Times:

Lobbyists for the drug industry are stepping up spending to influence
Congress, the states and even foreign governments as the debate intensifies
over how to provide prescription drug benefits to the elderly, industry
executives say. Confidential budget documents from the leading
pharmaceutical trade group show that it will spend millions of dollars
lobbying Congress and state legislatures, fighting price controls around the
world, subsidizing "like-minded organizations" and paying economists
to produce op-ed articles and monographs in response to critics. The
industry is worried that price controls and other regulations will tie the
drug makers' hands as state, federal and foreign governments try to expand
access to affordable drugs.

The documents show that the trade association, the Pharmaceutical Research
and Manufacturers of America, known as PhRMA, will spend at least $150 million
in the coming year. That represents an increase of 23 percent over this
year's budget of $121.7 million. The pharmaceutical association gets
nearly all its revenue from dues paid by member companies, according to the
documents, which were obtained from people in the industry. Dues will total
$143.8 million in the coming year, an increase of 24 percent, or $28.3
million, over this year's dues, the documents show.

In its budget for the fiscal year that begins on July 1, the pharmaceutical
lobby earmarks $72.7 million for advocacy at the federal level, directed
mainly at Congress; $4.9 million to lobby the Food and Drug Administration;
and $48.7 million for advocacy at the state level. The drug trade group
plans to spend $1 million for an "intellectual echo chamber of economists
- a standing network of economists and thought leaders to speak against
federal price control regulations through articles and testimony, and to serve
as a rapid response team." In addition, the budget sets aside $17.5
million to fight price controls and protect patent rights in foreign countries
and in trade negotiations. The PhRMA budget allocates $1 million
"to change the Canadian health care system" and $450,000 to stem the
flow of low-price prescription drugs from online pharmacies in Canada to
customers in the United States.

The trade association and its tactics have become an issue. In debate on
the Senate floor last summer, Senator Richard J. Durbin, Democrat of Illinois,
said, "PhRMA, this lobby, has a death grip on Congress."
Senator Charles E. Schumer, Democrat of New York, said the drug industry made
wonderful products, but was becoming "despised and hated" because of
its aggressive efforts to keep prices and profits high. But Senator
Orrin G. Hatch, Republican of Utah, defended the trade group, saying it had
been vilifed as a "satanic" force, "a bunch of greedy,
money-grubbing companies." In fact, he said, drug makers do more than any
other industry to help people.